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This is "Setting the Stage: Technology and the Modern Enterprise", chapter 1 from the book 
Information Systems: A Manager's Guide to Harnessing Technology (v. 2.0) by John Gallaugher. 
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Chapter 1 Setting the Stage: Technology and the 
Modern Enterprise 



1.1 Tech's Tectonic Shift: Radically Changing Business 
Landscapes 

Learning Objective 

i. Appreciate how in recent years, technology has helped bring about radical changes across 
industries and throughout societies. 

This book is written for a world that has changed radically in the most recent years of your lifetime. 

At the start of the prior decade, Google barely existed and well-known strategists dismissed Internet 
advertising models.M. Porter, "Strategy and the Internet," Harvard Business Review 79, no. 3 
(March 2001): 62-78. By decade's end, Google brought in more advertising revenue than any firm, 
online or off, and had risen to become the most profitable media company on the planet. Today 
billions in advertising dollars flee old media and are pouring into digital efforts, and this shift is 
reshaping industries and redefining skills needed to reach today's consumers. 

A decade ago the iPod also didn't exist, and Apple was widely considered a tech industry has-been. 
Within ten years Apple had grown to be the most valuable tech firm in the United States, selling 
more music and generating more profits from mobile device sales than any firm in the world. 

Moore's Law and other factors that make technology faster and cheaper have thrust computing and 
telecommunications into the hands of billions in ways that are both empowering the poor and 
poisoning the planet. 

Social media barely warranted a mention a decade ago, but today, Facebook's user base is larger than 
any nation, save for China and India. Firms are harnessing social media for new product ideas and 
for millions in sales. But with promise comes peril. When mobile phones are cameras just a short 
hop from YouTube, Flickr, and Twitter, every ethical lapse can be captured, every customer service 
flaw graffiti-tagged on the permanent record that is the Internet. The service and ethics bar for 



today's manager has never been higher. Social media has also emerged as a catalyst for global 
change, with Facebook and Twitter playing key organizing roles in uprisings worldwide. While a 
status update alone won't depose a dictator, technology can capture injustice, broadcast it to the 
world, disseminate ideas, and rally the far-reaching. 

Speaking of globalization, China started the prior decade largely as a nation unplugged and offline. 
But today China has more Internet users than any other country and has spectacularly launched 
several publicly traded Internet firms including Baidu, Tencent, and Alibaba. By 2009, China Mobile 
was more valuable than any firm in the United States except for Exxon Mobil and Wal-Mart. Think 
the United States holds the number one ranking in home broadband access? Not even close— the 
United States is ranked fifteenth.S. Shankland, "Google to Test Ultrafast Broadband to the Home," 
CNET, February 10, 2010. 

The world's second most populous nation, India, has ridden technology to become a global IT 
powerhouse. In two decades, India's tech sector has grown from "almost nothing" to a $73 billion 
industry, expanding even during the recent global recession. Technology has enabled the once 
almost-exclusively-agrarian nation to become a go-to destination for R&D and engineering across 
sectors as far-flung as aircraft engine design, medical devices, telecom equipment, and 
microprocessors.V. Wadhwa, "Indian Technology's Fourth Wave," BusinessWeek, December 8, 2010. 

The way we conceive of software and the software industry is also changing radically. IBM, HP, and 
Oracle are among the firms that collectively pay thousands of programmers to write code that is then 
given away for free. Today, open source software powers most of the Web sites you visit. And the rise 
of open source has rewritten the revenue models for the computing industry and lowered computing 
costs for start-ups to blue chips worldwide. 

Cloud computing and software as a service are turning sophisticated, high-powered computing into a 
utility available to even the smallest businesses and nonprofits. 



Data analytics and business intelligence are driving discovery and innovation, redefining modern 
marketing, and creating a shifting knife-edge of privacy concerns that can shred corporate 
reputations if mishandled. 

And the pervasiveness of computing has created a set of security and espionage threats unimaginable 
to the prior generation. 

As recent years have shown, tech creates both treasure and tumult. These disruptions aren't going 
away and will almost certainly accelerate, impacting organizations, careers, and job functions 
throughout your lifetime. It's time to place tech at the center of the managerial playbook. 

Key Takeaways 

• In the prior decade, firms like Google and Facebook have created profound shifts in the way 
firms advertise and individuals and organizations communicate. 

• New technologies have fueled globalization, redefined our concepts of software and 
computing, crushed costs, fueled data-driven decision making, and raised privacy and 
security concerns. 



Questions and Exercises 

1. Visit a finance Web site such as http://www.google.com/finance . Compare Google's profits to 
those of other major media companies. How have Google's profits changed over the past few 
years? Why have the profits changed? How do these compare with changes in the firm you 
chose? 

2. How is social media impacting firms, individuals, and society? 

3. How do recent changes in computing impact consumers? Are these changes good or bad? 
Explain. How do they impact businesses? 

4. What kinds of skills do today's managers need that weren't required a decade ago? 

5. Work with your instructor to decide ways in which your class can use social media. For 
example, you might create a Facebook group where you can share ideas with your classmates, 



join Twitter and create a hash tag for your class, or create a course wild. (See Chapter 7 
"Social Media, Peer Production, and Web 2.0" for more on these and other services.) 

1.2 It's Your Revolution 
Learning Objective 

1. Name firms across hardware, software, and Internet businesses that were founded by people 
in their twenties (or younger). 

The intersection where technology and business meet is both terrifying and exhilarating. But if you're 
under the age of thirty, realize that this is your space. While the fortunes of any individual or firm 
rise and fall over time, it's abundantly clear that many of the world's most successful technology 
firms— organizations that have had tremendous impact on consumers and businesses across 
industries— were created by young people. Consider just a few: 

Bill Gates was an undergraduate when he left college to found Microsoft— a firm that would 
eventually become the world's largest software firm and catapult Gates to the top of the Forbes list of 
world's wealthiest people (enabling him to also become the most generous philanthropist of our 
time). 

Figure 1.1 



s 



Young Bill Gates appears in a mug shot for a New Mexico traffic violation. Microsoft, now 
headquartered in Washington State, had its roots in New Mexico when Gates and partner Paul Allen 
moved there to be near early PC maker Altair. 

Source: Wikimedia Commons. 



Michael Dell was just a sophomore when he began building computers in his dorm room at the 
University of Texas. His firm would one day claim the top spot among PC manufacturers worldwide. 

Mark Zuckerberg founded Facebook as a nineteen-year-old college sophomore. 

Steve Jobs was just twenty-one when he founded Apple. 

Tony Hsieh proved his entrepreneurial chops when, at twenty-four, he sold LinkExchange to 
Microsoft for over a quarter of a billion dollars.M. Chafkin, "The Zappos Way of Managing," Inc., 
May l, 2009. He'd later serve as CEO of Zappos, eventually selling that firm to Amazon for $900 
million.S. Lacy, "Amazon Buys Zappos; The Price Is $928m., Not $847111.," TechCrunch, July 22, 
2009. 

Sergey Brin and Larry Page were both twenty-something doctoral students at Stanford University 
when they founded Google. So were Jerry Yang and David Filo of Yahoo! All would become 
billionaires. 

Andrew Mason of Groupon and Steve Chen and Chad Hurley of YouTube were all in their late 
twenties when they launched their firms. Jeff Bezos hadn't yet reached thirty when he began working 
on what would eventually become Amazon. 

Of course, those folks would seem downright ancient to Catherine Cook, who founded 
MyYearbook.com, a firm that at one point grew to become the third most popular social network in 
the United States. Cook started the firm when she was a sophomore— in high school. 

But you don't have to build a successful firm to have an impact as a tech revolutionary. Shawn 
Fanning's Napster, widely criticized as a piracy playground, was written when he was just nineteen. 
Fanning's code was the first significant salvo in the tech-fueled revolution that brought about an 
upending of the entire music industry. Finland's Linus Torvals wrote the first version of the Linux 
operating system when he was just twenty-one. Today Linux has grown to be the most influential 
component of the open source arsenal, powering everything from cell phones to supercomputers. 



TechCrunch crows that Internet entrepreneurs are like pro athletes— "they peak around [age] 25. "M. 
Arrington, "Internet Entrepreneurs Are Like Professional Athletes, They Peak Around 25," 
TechCrunch, April 30, 2011. BusinessWeek regularly runs a list of America's Best Young 
Entrepreneurs— the top twenty-five aged twenty-five and under. Inc. magazine's list of the Coolest 
Young Entrepreneurs is subtitled the "30 under 30." While not exclusively filled with the ranks of 
tech start-ups, both of these lists are nonetheless dominated with technology entrepreneurs. 
Whenever you see young people on the cover of a business magazine, it's almost certainly because 
they've done something groundbreaking with technology. The generals and foot soldiers of the 
technology revolution are filled with the ranks of the young, some not even old enough to legally have 
a beer. For the old-timers reading this, all is not lost, but you'd best get cracking with technology, 
quick. Junior might be on the way to either eat your lunch or be your next boss. 

Key Takeaways 

• Recognize that anyone reading this book has the potential to build an impactful business. 
Entrepreneurship has no minimum age requirement. 

• The ranks of technology revolutionaries are filled with young people, with several leading 
firms and innovations launched by entrepreneurs who started while roughly the age of the 
average university student. 



Questions and Exercises 

1. Look online for lists of young entrepreneurs. How many of these firms are tech firms or 
heavily rely on technology? Are there any sectors more heavily represented than tech? 

2. Have you ever thought of starting your own tech-enabled business? Brainstorm with some 
friends. What kinds of ideas do you think might make a good business? 

3. How have the costs of entrepreneurship changed over the past decade? What forces are 
behind these changes? What does this mean for the future of entrepreneurship? 

4. Many universities and regions have competitions for entrepreneurs (e.g., business plan 
competitions, elevator pitch competitions). Does your school have such a program? What are 



the criteria for participation? If your school doesn't have one, consider forming such a 
program. 

5. Research business accelerator programs such as Y-Combinator, TechStars, and Dreamlt. Do 
you have a program like this in your area? What do entrepreneurs get from participating in 
these programs? What do they give up? Do you think these programs are worth it? Why or 
why not? Have you ever used a product or service from a firm that has participated in one of 
these programs? 

6. Explore online for lists of resources for entrepreneurship. Share links to these resources 
using social media created for class. 

7. Have any alumni from your institution founded technology firms or risen to positions of 
prominence in tech-focused careers? If so, work with your professor to invite them to come 
speak to your class or to student groups on campus. Your career services, development 
(alumni giving), alumni association, and Linkedln searches may be able to help uncover 
potential speakers. 



1.3 Geek Up— Tech Is Everywhere and You'll Need It to Thrive 
Learning Objectives 

1. Appreciate the degree to which technology has permeated every management discipline. 

2. See that tech careers are varied, richly rewarding, and poised for continued growth. 

Shortly after the start of the prior decade, there was a lot of concern that tech jobs would be 
outsourced, leading many to conclude that tech skills carried less value and that workers with tech 
backgrounds had little to offer. Turns out this thinking was stunningly wrong. Tech jobs boomed, 
and as technology pervades all other management disciplines, tech skills are becoming more 
important, not less. Today, tech knowledge can be a key differentiator for the job seeker. It's the 
worker without tech skills that needs to be concerned. 

As we'll present in depth in a future chapter, there's a principle called Moore's Law that's behind fast, 
cheap computing. And as computing gets both faster and cheaper, it gets "baked into" all sorts of 



products and shows up everywhere: in your pocket, in your vacuum, and on the radio frequency 
identification (RFID) tags that track your luggage at the airport. 

Well, there's also a sort of Moore's Law corollary that's taking place with people, too. As technology 
becomes faster and cheaper and developments like open source software, cloud computing, software 
as a service (SaaS), and outsourcing push technology costs even lower, tech skills are being 
embedded inside more and more job functions. What this means is that even if you're not expecting 
to become the next Tech Titan, your career will doubtless be shaped by the forces of technology. 
Make no mistake about it— there isn't a single modern managerial discipline that isn't being deeply 
and profoundly impacted by tech. 

Finance 

Many business school students who study finance aspire to careers in investment banking. Many i- 
bankers will work on IPOs (initial public stock offerings), in effect helping value companies the first 
time these firms wish to sell their stock on the public markets. IPO markets need new firms, and the 
tech industry is a fertile ground that continually sprouts new businesses like no other. Other i- 
bankers will be involved in valuing merger and acquisition (M&A) deals, and tech firms are active in 
this space, too. Leading tech firms are flush with cash and constantly on the hunt for new firms to 
acquire. Cisco bought eighty-nine firms in the prior decade;M. Thompson, "Penetration Test: Cisco's 
Driving New Markets and We All Go Along for the Ride," Network World, March 16, 2010. Oracle 
and Facebook each bought nine firms in 2010, and Google bought a whopping twenty-seven firmslD. 
Hubler, "2010, the Year of the Big Comeback for IT M&As," Washington Technology, March 28, 
2011. And even in nontech industries, technology impacts nearly every endeavor as an opportunity 
catalyst or a disruptive wealth destroyer. The aspiring investment banker who doesn't understand 
the role of technology in firms and industries can't possibly provide an accurate guess at how much a 
company is worth. 

Table 1.1 2010 Tech Deals by Sector 



Sector 


Deals 


Value (millions) 



Sector 


Deals 


Value (millions) 


Software 


96 


$28,248 


IT Services 


95 


$24,718 


Internet 


80 


$13,070 


Hardware 


74 


$33,475 


Semiconductor 


45 


$7,600 



Source: T. Page, "2011 US Technology M&A Insights," PwC, March 2011. 

Those in other finance careers will be lending to tech firms and evaluating the role of technology in 
firms in an investment portfolio. Most of you will want to consider tech's role as part of your 
personal investments. And modern finance simply wouldn't exist without tech. When someone 
arranges for a bridge to be built in Shanghai, those funds aren't carried over in a suitcase— they're 
digitally transferred from bank to bank. And forces of technology blasted open the two-hundred- 
year-old floor trading mechanism of the New York Stock Exchange, in effect forcing the NYSE to sell 
shares in itself to finance the acquisition of technology-based trading platforms that were 
threatening to replace it. As another example of the importance of tech in finance, consider that 
Boston-based Fidelity Investments, one of the nation's largest mutual fund firms, spends roughly 
$2.8 billion a year on technology. Tech isn't a commodity for finance— it's the discipline's lifeblood. 

Accounting 



If you're an accountant, your career is built on a foundation of technology. The numbers used by 
accountants are all recorded, stored, and reported by information systems, and the reliability of any 
audit is inherently tied to the reliability of the underlying technology. Increased regulation, such as 
the heavy executive penalties tied to the Sarbanes-Oxley Act in the United States, have ratcheted up 
the importance of making sure accountants (and executives) get their numbers right. Negligence 
could mean jail time. This means the link between accounting and tech have never been tighter, and 
the stakes for ensuring systems accuracy have never been higher. 



Business students might also consider that while accounting firms regularly rank near the top of 
Business Week's "Best Places to Start Your Career" list, many of the careers at these firms are highly 
tech-centric. Every major accounting firm has spawned a tech-focused consulting practice, and in 
many cases, these firms have grown to be larger than the accounting services functions from which 
they sprang. Today, Deloitte's tech-centric consulting division is larger than the firm's audit, tax, and 
risk practices. At the time of its spin-off, Accenture was larger than the accounting practice at former 
parent Arthur Andersen (Accenture executives are also grateful they split before Andersen's collapse 
in the wake of the prior decade's accounting scandals). Now, many accounting firms that had 
previously spun off technology practices are once again building up these functions, finding strong 
similarities between the skills of an auditor and skills needed in emerging disciplines such as 
information security and privacy. 

Marketing 

Technology has thrown a grenade onto the marketing landscape, and as a result, the skill set needed 
by today's marketers is radically different from what was leveraged by the prior generation. Online 
channels have provided a way to track and monitor consumer activities, and firms are leveraging this 
insight to understand how to get the right product to the right customer, through the right channel, 
with the right message, at the right price, at the right time. The success or failure of a campaign can 
often be immediately assessed base on online activity such as Web site visit patterns and whether a 
campaign results in an online purchase. 

The ability to track customers, analyze campaign results, and modify tactics has amped up the return 
on investment of marketing dollars, with firms increasingly shifting spending from tough-to-track 
media such as print, radio, and television to the Web.J. Pontin, "But Who's Counting?" Technology 
Review, March/ April 2009. And new channels continue to emerge. Firms as diverse as Southwest 
Airlines, Starbucks, UPS, and Zara have introduced apps for the iPhone, iPad, and iPod touch. In 
roughly four years, iOS devices are now in the hands, backpacks, purses, and pockets of over 200 
million people worldwide, delivering location-based messages and services and even allowing for 



cashless payment.D. Coldewey, "iOS Passes 200 Million Devices, 25 Million of Which Are iPads," 
TechCrunch, June 6, 2011. 

The rise of social media is also part of this blown-apart marketing landscape. Now all customers can 
leverage an enduring and permanent voice, capable of broadcasting word-of-mouth influence in 
ways that can benefit and harm a firm. Savvy firms are using social media to generate sales, improve 
their reputations, better serve customers, and innovate. Those who don't understand this landscape 
risk being embarrassed, blindsided, and out of touch with their customers. 

Search engine marketing (SEM), search engine optimization (SEO), customer relationship 
management (CRM), personalization systems, and a sensitivity to managing the delicate balance 
between gathering and leveraging data and respecting consumer privacy are all central components 
of the new marketing toolkit. And there's no looking back— tech's role in marketing will only grow in 
prominence. 

Operations 

A firm's operations management function is focused on producing goods and services, and 
operations students usually get the point that tech is the key to their future. Quality programs, 
process redesign, supply chain management, factory automation, and service operations are all tech- 
centric. These points are underscored in this book as we introduce several examples of how firms 
have designed fundamentally different ways of conducting business (and even entirely different 
industries), where value and competitive advantage are created through technology-enabled 
operations. 

Human Resources 

Technology helps firms harness the untapped power of employees. Knowledge management systems 
are morphing into social media technologies— social networks, wikis, and Twitter-style messaging 
systems that can accelerate the ability of a firm to quickly organize and leverage teams of experts. 
And crowdsourcing tools and question-and-answer sites like Quora allow firms to reach out for 



expertise beyond their organizations. Human resources (HR) directors are using technology for 
employee training, screening, and evaluation. The accessibility of end-user technology means that 
every employee can reach the public, creating an imperative for firms to set policy on issues such as 
firm representation and disclosure and to continually monitor and enforce policies as well as capture 
and push out best practices. The successful HR manager recognizes that technology continually 
changes an organization's required skill sets as well as employee expectations. 

The hiring and retention practices of the prior generation are also in flux. Recruiting hasn't just 
moved online; it's now grounded in information systems that scour databases for specific skill sets, 
allowing recruiters to cast a wider talent net than ever before. Job seekers are writing resumes with 
keywords in mind, aware that the first cut is likely made by a database search program, not a human 
being. The rise of professional social networks also puts added pressure on employee satisfaction and 
retention. Prior HR managers fiercely guarded employee directories for fear that a headhunter or 
competitive firm might raid top talent. Now the equivalent of a corporate directory can be easily 
pulled up via Linkedln, a service complete with discrete messaging capabilities that can allow 
competitors to rifle-scope target your firm's best and brightest. Thanks to technology, the firm that 
can't keep employees happy, engaged, and feeling valued has never been more vulnerable. 

The Law 

And for those looking for careers in corporate law, many of the hottest areas involve technology. 
Intellectual property, patents, piracy, and privacy are all areas where activity has escalated 
dramatically in recent years. The number of U.S. patent applications waiting approval has tripled in 
the past decade, while China saw a threefold increase in patent applications in just five yearsJ. 
Schmid and B. Poston, "Patent Backlog Clogs Recovery," Milwaukee Journal Sentinel, August 15, 
2009. Firms planning to leverage new inventions and business methods need legal teams with the 
skills to sleuth out whether a firm can legally do what it plans to. Others will need legal expertise to 
help them protect proprietary methods and content, as well as to help enforce claims in the home 
country and abroad. 



Information Systems Careers 

While the job market goes through ebbs and flows, recent surveys have shown there to be more IT 
openings than in any field except health care. 2009 figures are from http://www.indeed.com . Money 
magazine ranked tech jobs as two of the top five "Best Jobs in America.""Best Jobs in America," 
CNNMoney, 2009, 

http://money.cnn.eom/magazines/moneymag/bestjobs/200Q/snapshots/1.html . BusinessWeek 
ranks consulting (which heavily hires tech grads) and technology as the second and third highest 
paying industries for recent college graduates. L. Gerdes, "The Best Places to Launch a Career," 
BusinessWeek, September 15, 2008. Technology careers have actually ranked among the safest 
careers to have during the most recent downturn.T. Kaneshige, "Surprise! Tech Is a Safe Career 
Choice Today," InfoWorld, February 4, 2009. And Fortune's ranks of the "Best Companies to Work 
For" is full of technology firms and has been topped by a tech business for five years straight.See 
"Best Companies to Work For," Fortune, 2007—2010. For 2010 list, see 
http://money.cnn.com/magazines/fortune/bestcompanies/20io/full list/index.html . 

Students studying technology can leverage skills in ways that range from the highly technical to those 
that emphasize a tech-centric use of other skills. Opportunities for programmers abound, 
particularly for those versed in new technologies, but there are also roles for experts in areas such as 
user-interface design (who work to make sure systems are easy to use), process design (who leverage 
technology to make firms more efficient), and strategy (who specialize in technology for competitive 
advantage). Nearly every large organization has its own information systems department. That group 
not only ensures that systems get built and keep running but also increasingly takes on strategic roles 
targeted at proposing solutions for how technology can give the firm a competitive edge. Career 
paths allow for developing expertise in a particular technology (e.g., business intelligence analyst, 
database administrator, social media manager), while project management careers leverage skills in 
taking projects from idea through deployment. 

Even in consulting firms, careers range from hard-core programmers who "build stuff' to analysts 
who do no programming but might work identifying problems and developing a solutions blueprint 



that is then turned over to another team to code. Careers at tech giants like Apple, Google, and 
Microsoft don't all involve coding end-user programs either. Each of these firms has their own client- 
facing staff that works with customers and partners to implement solutions. Field engineers at these 
firms may work as part of a sales team to show how a given company's software and services can be 
used. These engineers often put together prototypes that are then turned over to a client's in-house 
staff for further development. An Apple field engineer might show how a firm can leverage 
podcasting in its organization, while a Google field engineer can help a firm incorporate search, 
banner, and video ads into its online efforts. Careers that involve consulting and field engineering are 
often particularly attractive for those who enjoy working with an ever-changing list of clients and 
problems across various industries and in many different geographies. 

Upper-level career opportunities are also increasingly diverse. Consultants can become partners who 
work with the most senior executives of client firms, helping identify opportunities for those 
organizations to become more effective. Within a firm, technology specialists can rise to be chief 
information officer or chief technology officer— positions focused on overseeing a firm's information 
systems development and deployment. And many firms are developing so-called C-level specialties 
in emerging areas with a technology focus, such as chief information security officer (CISO), and 
chief privacy officer (CPO). Senior technology positions may also be a ticket to the chief executive's 
suite. A recent Fortune article pointed out how the prominence of technology provides a training 
ground for executives to learn the breadth and depth of a firm's operations and an understanding of 
the ways in which firms are vulnerable to attack and where it can leverage opportunities for 
growth.J. Fortt, "Tech Execs Get Sexy," Fortune, February 12, 2009. 

Your Future 

With tech at the center of so much change, realize that you may very well be preparing for careers 
that don't yet exist. But by studying the intersection of business and technology today, you develop a 
base to build upon and critical thinking skills that will help you evaluate new, emerging technologies. 
Think you can afford to wait on tech study then quickly get up to speed? Whom do you expect to have 
an easier time adapting and leveraging a technology like social media— today's college students who 



are immersed in technology or their parents who are embarrassingly dipping their toes into the 
waters of Facebook? Those who put off an understanding of technology risk being left in the dust. 

Consider the nontechnologists who have tried to enter the technology space these past few years. 
News Corp. head Rupert Murdoch piloted his firm to the purchase of MySpace only to see this one- 
time leader lose share to rivals. O. Malik, "MySpace, R.I.P.," GigaOM, February 10, 2010. Former 
Warner executive Terry Semel presided over Yahoo! 'sJ. Thaw, "Yahoo's Semel Resigns as Chief amid 
Google's Gains," Bloomberg, June 18, 2007. malaise as Google blasted past it. Barry Diller, the man 
widely credited with creating the Fox Network, led InterActive Corp. (IAC) in the acquisition of a 
slew of tech firms ranging from Expedia to Ask.com, only to break the empire up as it foundered.G. 
Fabrikant and M. Helft, "Barry Diller Conquered. Now He Tries to Divide," New York Times, March 
16, 2008. And Time Warner head Jerry Levin presided over the acquisition of AOL, executing what 
many consider to be one of the most disastrous mergers in U.S. business history. J. Quinn, "Final 
Farewell to Worst Deal in History— AOL-Time Warner," Telegraph (UK), November 21, 2009. 
Contrast these guys against the technology-centric successes of Mark Zuckerberg (Facebook), Steve 
Jobs (Apple), and Sergey Brin and Larry Page (Google). 

While we'll make it abundantly clear that a focus solely on technology is a recipe for disaster, a 
business perspective that lacks an appreciation for tech's role is also likely to be doomed. At this 
point in history, technology and business are inexorably linked, and those not trained to evaluate and 
make decisions in this ever-shifting space risk irrelevance, marginalization, and failure. 

Key Takeaways 

• As technology becomes cheaper and more powerful, it pervades more industries and is 
becoming increasingly baked into what were once nontech functional areas. 

• Technology is impacting every major business discipline, including finance, accounting, 
marketing, operations, human resources, and the law. 

• Tech jobs rank among the best and highest-growth positions, and tech firms rank among the 
best and highest-paying firms to work for. 



• Information systems (IS) jobs are profoundly diverse, ranging from those that require heavy 
programming skills to those that are focused on design, process, project management, 
privacy, and strategy. 

Questions and Exercises 

1. Look at Fortune's "Best Companies to Work For" list. How many of these firms are 
technology firms? Which firm would you like to work for? Are they represented on this list? 

2. Look at BusinessWeek's "Best Places to Start Your Career" list. Is the firm you mentioned 
above also on this list? 

3. What are you considering studying? What are your short-term and long-term job goals? 
What role will technology play in that career path? What should you be doing to ensure that 
you have the skills needed to compete? 

4. Which jobs that exist today likely won't exist at the start of the next decade? Based on your 
best guess on how technology will develop, can you think of jobs and skill sets that will likely 
emerge as critical five and ten years from now? 

1.4 The Pages Ahead 
Learning Objective 

1. Understand the structure of this text, the issues and examples that will be introduced, and 
why they are important. 

Hopefully this first chapter has helped get you excited for what's to come. The text is written in a 
style meant to be as engaging as the material you'll be reading for the rest of your management 
career— articles in business magazines and newspapers. The introduction of concepts in this text are 
also example rich, and every concept introduced or technology discussed is always grounded in a 
real-world example to show why it's important. But also know that while we celebrate successes and 
expose failures in that space where business and technology come together, we also recognize that 
firms and circumstances change. Today's winners have no guarantee of sustained dominance. What 



you should acquire in the pages that follow are a fourfold set of benefits that (1) provide a description 
of what's happening in industry today, (2) offer an introduction to key business and technology 
concepts, (3) offer a durable set of concepts and frameworks that can be applied even as technologies 
and industries change, and (4) develop critical thinking that will serve you well throughout your 
career as a manager. 

Chapters don't have to be read in order, so feel free to bounce around, if you'd like. But here's what 
you can expect: 

Chapter 2 "Strategy and Technology: Concepts and Frameworks for Understanding What Separates 
Winners from Losers" focuses on building big-picture skills to think about how to leverage 
technology for competitive advantage. Technology alone is rarely the answer, but through a rich set 
of examples, we'll show how firms can weave technology into their operations in ways that create and 
reinforce resources that can garner profits while repelling competitors. A mini case examines tech's 
role at FreshDirect, a firm that has defied the many failures in the online grocery space and 
devastated traditional rivals. BlueNile, Dell, Lands' End, TiVo and Yahoo! are among the many firms 
providing a rich set of examples illustrating successes and failures in leveraging technology. The 
chapter will show how firms use technology to create and leverage brand, scale economies, switching 
costs, data assets, network effects, and distribution channels. We'll introduce how technology relates 
to two popular management frameworks— the value chain and the five forces model. And we'll 
provide a solid decision framework for considering the controversial and often misunderstood role 
that technology plays among firms that seek an early-mover advantage. 

In Chapter 3 "Zara: Fast Fashion from Savvy Systems" , we see how a tech-fed value chain helped 
Spanish clothing giant Zara craft a counterintuitive model that seems to defy all conventional 
wisdom in the fashion industry. We'll show how Zara's model differs radically from that of the firm it 
displaced to become the world's top clothing retailer: Gap. We'll see how technology impacts product 
design, product development, marketing, cycle time, inventory management, and customer loyalty 
and how technology decisions influence broad profitability that goes way beyond the cost-of -goods 
thinking common among many retailers. We'll also offer a mini case on Fair Factories Clearinghouse, 



an effort highlighting the positive role of technology in improving ethical business practices. Another 
mini case shows the difference between thinking about technology versus broad thinking about 
systems, all through an examination of how high-end fashion house Prada failed to roll out 
technology that on the surface seemed very similar to Zara's. 

Chapter 4 "Netflix in Two Acts: The Making of an E-commerce Giant and the Uncertain Future of 
Atoms to Bits" tramples the notion that dot-com start-up firms can't compete against large, 
established rivals. We'll show how information systems at Netflix created a set of assets that grew in 
strength and remains difficult for rivals to match. The economics of pure-play versus brick-and- 
mortar firms is examined, and we'll introduce managerial thinking on various concepts such as the 
data asset, personalization systems (recommendation engines and collaborative filtering), the long 
tail and the implications of technology on selection and inventory, crowdsourcing, using technology 
for novel revenue models (subscription and revenue-sharing with suppliers), forecasting, and 
inventory management. The second part of the chapter covers Netflix's uncertain future, where we 
present how the shift from atoms (physical discs) to bits (streaming and downloads) creates 
additional challenges. Issues of licensing and partnerships, revenue models, and delivery platforms 
are all discussed. 

Chapter 5 "Moore's Law: Fast, Cheap Computing and What It Means for the Manager" focuses on 
understanding the implications of technology change for firms and society. The chapter offers 
accessible definitions for technologies impacted by Moore's Law, but goes beyond semiconductors 
and silicon to show how the rate of magnetic storage (e.g., hard drives) and networking create 
markets filled with uncertainty and opportunity. The chapter will show how tech has enabled the rise 
of Apple and Amazon, created mobile phone markets that empower the poor worldwide, and has 
created five waves of disruptive innovation over five decades. We'll also show how Moore's Law, 
perhaps the greatest economic gravy train in history, will inevitably run out of steam as the three 
demons of heat, power, and limits on shrinking transistors halt the advancement of current 
technology. Studying technologies that "extend" Moore's Law, such as multicore semiconductors, 
helps illustrate both the benefit and limitation of technology options, and in doing so, helps develop 
skills around recognizing the pros and cons of a given innovation. Supercomputing, grid, and cloud 



computing are introduced through examples that show how these advances are changing the 
economics of computing and creating new opportunity. Finally, issues of e-waste are explored in a 
way that shows that firms not only need to consider the ethics of product sourcing, but also the ethics 
of disposal. 

In Chapter 6 "Understanding Network Effects" , we'll see how technologies, services, and platforms 
can create nearly insurmountable advantages. Tech firms from Facebook to Intel to Microsoft are 
dominant because of network effects— the idea that some products and services get more valuable as 
more people use them. Studying network effects creates better decision makers. The concept is at the 
heart of technology standards and platform competition, and understanding network effects can help 
managers choose technologies that are likely to win, hopefully avoiding getting caught with a failed, 
poorly supported system. Students learn how network effects work and why they're difficult to 
unseat. The chapter ends with an example-rich discussion of various techniques that one can use to 
compete in markets where network effects are present. 

Chapter 7 "Social Media. Peer Production, and Web 2.0" explores business issues behind several 
services that have grown to become some of the Internet's most popular destinations. Peer 
production and social media are enabling new services and empowering the voice of the customer as 
never before. In this chapter, students learn about various technologies used in social media and 
peer production, including blogs, wikis, social networking, Twitter, and more. Prediction markets 
and crowdsourcing are introduced, along with examples of how firms are leveraging these concepts 
for insight and innovation. Finally, students are offered guidance on how firms can think SMART by 
creating a social media awareness and response team. Issues of training, policy, and response are 
introduced, and technologies for monitoring and managing online reputations are discussed. 

Chapter 8 "Facebook: Building a Business from the Social Graph" will allow us to study success and 
failure in IS design and deployment by examining one of the Web's hottest firms. Facebook is one of 
the most accessible and relevant Internet firms to so many, but it's also a wonderful laboratory to 
discuss critical managerial concepts. The founding story of Facebook introduces concepts of venture 
capital, the board of directors, and the role of network effects in entrepreneurial control. Feeds show 



how information, content, and applications can spread virally, but also introduce privacy concerns. 
Facebook's strength in switching costs demonstrates how it has been able to envelop additional 
markets from photos to chat to video and more. The failure of the Beacon system shows how even 
bright technologists can fail if they ignore the broader procedural and user implications of an 
information systems rollout. Social networking advertising is contrasted with search, and the perils 
of advertising alongside social media content are introduced. Issues of predictors and privacy are 
covered. And the case allows for a broader discussion on firm value and what Facebook might really 
be worth. 

Chapter q "Understanding Software: A Primer for Managers" offers a primer to help managers better 
understand what software is all about. The chapter offers a brief introduction to software 
technologies. Students learn about operating systems, application software, and how these relate to 
each other. Enterprise applications are introduced, and the alphabet soup of these systems (e.g., 
ERP, CRM, and SCM) is accessibly explained. Various forms of distributed systems (client-server, 
Web services, messaging) are also covered. The chapter provides a managerial overview of how 
software is developed, offers insight into the importance of Java and scripting languages, and 
explains the differences between compiled and interpreted systems. System failures, total cost of 
ownership, and project risk mitigation are also introduced. The array of concepts covered helps a 
manager understand the bigger picture and should provide an underlying appreciation for how 
systems work that will serve even as technologies change and new technologies are introduced. 

The software industry is changing radically, and that's the focus of Chapter 10 "Software in Flux: 
Partly Cloudy and Sometimes Free" . The issues covered in this chapter are front and center for any 
firm making technology decisions. We'll cover open source software, software as a service, hardware 
clouds, and virtualization. Each topic is introduced by discussing advantages, risks, business models, 
and examples of their effective use. The chapter ends by introducing issues that a manager must 
consider when making decisions as to whether to purchase technology, contract or outsource an 
effort, or develop an effort in-house. 



In Chapter 11 "The Data Asset: Databases, Business Intelligence, and Competitive Advantage" , we'll 
study data, which is often an organization's most critical asset. Data lies at the heart of every major 
discipline, including marketing, accounting, finance, operations, forecasting, and planning. We'll 
help managers understand how data is created, organized, and effectively used. We'll cover 
limitations in data sourcing, issues in privacy and regulation, and tools for access, including various 
business intelligence technologies. A mini case on Wal-Mart shows data's use in empowering a firm's 
entire value chain, while the mini case on Caesars Entertainment (formerly known as Harrah's) 
shows how data-driven customer relationship management is at the center of creating an industry 
giant. 

Chapter 12 "A Manager's Guide to the Internet and Telecommunications" unmasks the mystery of 
the Internet— it shows how the Internet works and why a manager should care about IP addresses, IP 
networking, the DNS, peering, and packet versus circuit switching. We'll also cover last-mile 
technologies and the various strengths and weaknesses of getting a faster Internet to a larger 
population. The revolution in mobile technologies and the impact on business will also be presented. 

Chapter 13 "Information Security: Barbarians at the Gateway (and Just About Everywhere Else)" 
helps managers understand attacks and vulnerabilities and how to keep end users and organizations 
more secure. The ever-increasing number of megabreaches at firms that now include TJX, 
Heartland, Epsilon, Sony, and even security firm RSA, plus the increasing vulnerability of end-user 
systems, have highlighted how information security is now the concern of the entire organization, 
from senior executives to frontline staff. This chapter explains what's happening with respect to 
information security— what kinds of attacks are occurring, who is doing them, and what their 
motivation is. We'll uncover the source of vulnerabilities in systems: human, procedural, and 
technical. Hacking concepts such as botnets, malware, phishing, and SQL injection are explained 
using plain, accessible language. Also presented are techniques to improve information security both 
as an end user and within an organization. The combination of current issues and their relation to a 
broader framework for security should help you think about vulnerabilities even as technologies and 
exploits change over time. 



Chapter 14 "Google in Three Parts: Search, Online Advertising, and Beyond" discusses one of the 
most influential and far-reaching firms in today's business environment. As pointed out earlier, a 
decade ago Google barely existed, but it now earns more ad revenue and is a more profitable media 
company than any firm, online or off. Google is a major force in modern marketing, research, and 
entertainment. In this chapter you'll learn how Google (and Web search in general) works. Issues of 
search engine ranking, optimization, and search infrastructure are introduced. Students gain an 
understanding of search advertising and other advertising techniques, ad revenue models such as 
CPM and CPC, online advertising networks, various methods of customer profiling (e.g., IP 
addresses, geotargeting, cookies), click fraud, fraud prevention, and issues related to privacy and 
regulation. The chapter concludes with a broad discussion of how Google is evolving (e.g., Android, 
Chrome, Apps, YouTube) and how this evolution is bringing it into conflict with several well-funded 
rivals, including Amazon, Apple, Microsoft, and more. 

Nearly every industry and every functional area is increasing its investment in and reliance on 
information technology. With opportunity comes trade-offs: research has shown that a high level of 
IT investment is associated with a more frenzied competitive environment.E. Brynjolfsson, A. 
McAfee, M. Sorell, and F. Zhu, "Scale without Mass: Business Process Replication and Industry 
Dynamics," SSRN, September 30, 2008. But while the future is uncertain, we don't have the luxury 
to put on the brakes or dial back the clock— tech's impact is here to stay. Those firms that emerge as 
winners will treat IT efforts "as opportunities to define and deploy new ways of working, rather than 
just projects to install, configure, or integrate.'A.. McAfee and E. Brynjolfsson, "Dog Eat Dog," Sloan 
Management Review, April 27, 2007. The examples, concepts, and frameworks in the pages that 
follow will help you build the tools and decision-making prowess needed for victory. 

Key Takeaways 

• This text contains a series of chapters and cases that expose durable concepts, technologies, 
and frameworks, and does so using cutting-edge examples of what's happening in industry 
today. 



• While firms and technologies will change, and success at any given point in time is no 

guarantee of future victory, the issues illustrated and concepts acquired should help shape a 
manager's decision making in a way that will endure. 

Questions and Exercises 

1. Which firms do you most admire today? How do these firms use technology? Do you think 
technology gives them an advantage over rivals? Why or why not? 

2. What areas covered in this book are most exciting? Most intimidating? Which do you think 
will be most useful? 



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